Regulatory Frameworks, Market Cultivation and Outlook …€¦ · Regulatory Frameworks, Market Cultivation and Outlook for Wind Energy in Vietnam Long Thang Nguyen, Consultant Up-Scaling

Facilitator

Regulatory Frameworks, Market Cultivation

and Outlook for Wind Energy in Vietnam

Long Thang Nguyen,

Consultant

Up-Scaling of Wind Power in Vietnam

GIZ Energy Support Programme Vietnam

Facilitator

Long Nguyen | Renewable Energy Week 2015 | 15.10.2015 | Page 2

Content

GIZ activities in Vietnam

Current status and future prospects

Policy framework for wind energy market

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GIZ activities in Vietnam Portfolio

DOING MORE in LESS

AREAS: Selectivity: 3 priority areas

Selected alignment to Viet Nam‘s

development priorities and goals

Central framework of reference is the

National Green Growth Strategy of

Viet Nam

Concentration on 1-2 strategic

regions in each sector

Strengthening of the policy dialogue

Embassy/VNM-Government

Integrated programs instead of

projects: Technical and financial

cooperation under one program

concept and set of goals

Integration of matters of social

inclusion, (political) participation and

partnership with private sectors into

the priority areas

GREEN GROWTH AS THE OVERARCHING FRAMEWORK GREEN GROWTH AS THE OVERARCHING FRAMEWORK

PRIORITY AREA Environmental Policy and

sustainable Use of

Natural Resources

PRIORITY AREA Environmental Policy and

sustainable Use of

Natural Resources

Biodiversity and Forest Biodiversity and Forest

Climate Change &

Coastal Ecosystemns

Climate Change &

Coastal Ecosystemns

Outside Priority Areas

The Macroeconomic Reforms/Green Growth programme

and other supplementary activities form a substantive and

structural bracket over the entire portfolio, generate

synergies, pursue common goals

Outside Priority Areas

The Macroeconomic Reforms/Green Growth programme

and other supplementary activities form a substantive and

structural bracket over the entire portfolio, generate

synergies, pursue common goals

PRIORITY AREA Energy

PRIORITY AREA Energy

Renewable Energy

Support Project

Renewable Energy

Support Project

Upscaling Wind

Energy in Viet Nam

Upscaling Wind

Energy in Viet Nam

Renewable Energy

and Energy Efficiency

Renewable Energy

and Energy Efficiency

PRIORITY AREA Vocational Training

PRIORITY AREA Vocational Training

Reform of

Technical and

Vocational

Education and

Training

Reform of

Technical and

Vocational

Education and

Training

Hai Phong

Polytechnic College

Bach Nghe

Hai Phong

Polytechnic College

Bach Nghe

Vocational training

for subway

operation staff

Vocational training

for subway

operation staff

Centre of

Excellence for

Green TVET

Centre of

Excellence for

Green TVET

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Extension

GIZ activities in Vietnam Energy Projects

Ren

ewa

ble

En

erg

y

En

erg

y

Eff

icie

ncy

Smart Grids (BMZ/DKTI)

RE+EE (BMZ)

2009 2010 2016 2017 2018 2011 2012 2013 2014 2015

Wind I (BMUB)

Bioenergy I (BMUB/IKI) - RESP

Wind II (BMZ/DKTI)

Legend:

PDP (BMWi) business partnerships btw

German and Vietnamese companies

Preparation Project Idea Implementation

G 2 G

Negotiations

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GIZ activities in Vietnam Support on Wind Power: Action Areas

Action Area 1:

Legal and Regulatory Frameworks

Policy advice

Feed-in tariff

Regulation, licensing

Strategic advice (local value creation)

Systems analysis

Technical standards, guidelines, e.g. ESIAs

Update wind data quality

…

Action Area 2:

Capacity Development

Capacity Needs Assessment

Support to local banks

Support to local project developers

Support to wind power association

Vocational training for wind

Short-term training courses

…

Action Area 3:

Technology Cooperation

Market information

Investment Guidelines

Support to private sector partnerships

Vietnamese German research cooperation

…

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https://www.google.com/maps/d/u/0/viewer?mid=zKJFPJnc-KLQ.khKu-oq60D0w

GIZ activities in Vietnam GIZ/MOIT Wind Measurement Campaign

Project from 2012-2015

10 sites in 8 provinces

80 m mast

High quality sensors (IEC standards; 5 equipped with GSM connection)

•Windspeed (80m/60m/40m) [m/s]

•Weibull A-Parameter (80m/60m/40m)

•Weigbull k-Parameter (80m/60m/40m)

•Turbulence intensity (80m/60m/40m)

Climatological site characteristics:

•Temperature (14m) [°C]

•Air pressure (6m) [hPa]

•Relative humidity (14m) [%]

DATA published on World Bank Open Energy Data Platform






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Socialist Republic of Vietnam: Country Overview

Population 2014: 92 million

GDP 2014: 184 billion USD (+5,98%)

Nominal income per capita 2014: 4,012 USD (PPP)

Source: IMF (2014), Auswärtiges Amt (2015)

Reunification 1975

Reformation (Đổi Mới) 1986

Joining the WTO 2007

Lower-middle-income country Since 2009

Source: Wikipedia

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Electricity Production: Development and Outlook

-

20

40

60

80

100

120

140

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

En

erg

y P

rod

uct

ion

(T

Wh

)

Electricity production from oil sourcesElectricity production from natural gas sourcesElectricity production from coal sourcesElectricity production from hydroelectric sourcesElectricity production from renewable sources, excluding hydroelectric

Generation according draft revised PDP VII

2020: 258.8-278.9 TWh

2030: 515.7-632.1 TWh

Source: WB (2015); IEA (2015); GDE (2015)

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Electricity Production and Generation Capacity 2014

2014: 145.5 TWh 2014: 34 GW

Source: EVN (2015); IoE (2015)

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Power Development Plan: Draft Revised PDP VII

Source: GDE (2015)

* including SHP

**including storage hydropower

2020: 61 GW

2030: 116 GW

Installed Capacity

2014: 34 GW

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Energy Policy and Regulatory Environment

MOIT Ministry of Industry and Trade

MOF Ministry of Finance

MPI Ministry of Planning and Investment

GDE General Directorate of Energy

ERAV Energy Regulatory Authority of Vietnam

EVN Electricity of Vietnam

G EVN owned Generation Companies

G – e Equitized Generation Companies (i.e. privatized or partly privatized)

IPP Independent Power Producer

NLDC National Load Dispatch Center

NPT National Power Transmission Corporation

DC Distribution Companies

C Consumer

State Management

Electric Flows

Power System Operation Interface

Gen

era

tio

n

DC

G G - e

IPP

MOIT

MOF

MPI

Other Ministries

GDE ERAV

C

Tra

nsp

ort

Sy

stem

Op

era

tio

n

Prime Minister

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Electricity Consumer Prices

Average consumer price 2004-2015

No transparent reflection of the actual costs of the energy system EVN under financial pressure

Non-transparent decision processes

Even though prices almost doubled in the last 10 years:

Price increases are not substantial enough and reflect mostly inflationary adjustments

Realisation/implementation of a fully competitive electricity sector until 2025 unclear

Current average consumer price: 7.5 USCents/kWh

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Wind Energy: Current Remuneration Scheme (I)

Duration of PPA: 20 Years

Feed-in-tariff

Decision 37/2011/QD-TTg (29.06.2011)

Feed-in-Tariff for Wind Power:

Tariff: 7,8 USCents/kWh

Currently under revision

6.8 USCents/kWh power purchase EVN

1.0 USCents/kWh Vietnam Environmental

Protection Fund

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Policy framework for wind energy market Wind energy: Current Remuneration Scheme (II)

Additional Incentive Mechanisms for RE

Import tax

• Varying levels of import tax, depending on type of imported goods

• Exemption on goods forming fixed assets, which cannot be produced locally

Waiving of land use/lease fees

• Land is provided for free or lease fee is reduced as part of the licensing agreement

Corporate income Tax

• Years 1-4: tax exemption

• Years 5-13: 50% tax reduction

Higher depreciation rate

• For equipment of renewable energy power plants a 1.5 higher depreciation rate can be applied

Improved conditions for Public private partnership (PPP)

Project development

Operation and electricity production

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FIT adjustment proposal

GIZ Wind FIT Study (2014)

Met

ho

do

log

y

Qualitative:

• Interviews

• Questionnaires

• Assessment of existing Framework

Quantitative:

• Wind data

• Pre-/feasibility studies

• International comparison

Req

uir

ed i

nv

estm

ent

and

ass

um

ed

inv

esto

r st

ruct

ure

1 GW by 2020:

• Ca. US$ 2.1 billion over next 5 years

At average debt level of 70%

• US$ 630m equity

• US$ 1.47b debt

Assumed investor types:

• Highly-subsidized

• Strategic

• Fully commercial

Bas

is f

or

anal

ysi

s

PDP Targets:

• 1 GW Wind Power by 2020

Assumptions based on P/FS questionnaires and international experience for:

• CapEx

• OpEx

• Capacity Factor

FIT calculation

All investor types must be targeted with one FIT

Assumed IRR:

• 10% (internat. experience)

Basis for calculations:

• LEC (levelized costs of electricity)

• Additional incentives like tax breaks etc.

Result:

10.4 US¢/kWh (o-s)

Tariff-funded

levy on the electricity

price for 1GW by 2020

less than 5VND/kWh

General recommendations:

•FIT payment system should be one-stop-shop (not FiT + VNEPF)

•Government guarantee for payments

•Better wind measurements and improved standards

•Enforce standard agreements (network connection and PPA)

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Wind Energy Potential in Vietnam

3,500 km long coastal line

Latest wind atlas from 2011 AWS Truepower (2011)

Source: AWS Truepower (2011)

Political targets (PDP VII)

• 2020: 1 GW 2030: 6.2 GW

• No offshore wind power has been studied/planned

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Draft revised PDP VII – planned RE extension

-

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

MW

Small hydropower

Wind

Solar

Biomass and others

Source: MOIT (2015)

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Long Nguyen | Renewable Energy Week 2015| 15.10.2015 | Page 18


Wind Energy Status Quo

87 MW in operation

• Tuy Phong/Binh Thuan wind farm 30 MW (20 x 1.5 MW Fuhrlaender)

• Bac Lieu wind farm 51.2 MW (32 x 1.6 MW GE)

• Phu Quy wind/diesel hybrid system 6 MW (3 x 2 MW Vestas)

In planning No reliable information

IoE (2014):

• 52 projects in planning

• cumulated rated power of 4,252 MW

• Feasibility questionable

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Province Number of projects Capacity (MW)

Bình Đinh 3 112 Phú Yên 2 50 Ninh Thuan 13 1068 Bình Thuan 15 1182 Gia Lai 1 40.5 Lâm Đong 2 300 Bà Ria-Vũng Tàu 3 118 Tien Giang 1 100 Ben Tre 2 280 Trà Vinh 2 123 Sóc Trăng 5 480 Bac Liêu 1 99 Cà Mau 2 300 Total 52 4252


Registered Wind Energy Projects according to IoE (2014)

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Wind Energy Projects according to EVN (2015)

Wind park Province Operator/Owner Turbines Capacity [MW] Output [GWh]

In operation

Tuy Phong Phase 1 Binh Thuan

Vietnam Renewable Energy Joint Stock Company

(REVN)

Fuhrländer 20 x 1,5 MW

Phase 1: 30 MW Phase 2: 120 MW

2012: 54,5 2013: 46,1

Phu Quy Binh Thuan Petro Vietnam Power Corporation

Vestas 3 x 2 MW

6 MW (+ 3 MW Diesel)

2012: 0,9 2013: 2,5

Bac Lieu Phase 1 Bac Lieu Cong Ly Ltd Company GE

10 x 1,6 MW 16 MW

2013: 15,9

Planning/ construction

Phuong Mai 1 Binh Dinh 12 x 2,5 MW 30 MW -

Phuong Mai 3 Binh Dinh 14 x 2,5 MW 35 MW

Bac Lieu Phase 2 Bac Lieu Cong Ly Ltd Company GE

55 x 1,6 MW 88 MW -

Trung Nam Ninh Thuan 14 x 2,5 MW 35 MW -

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Process overview for Wind Power Project Development

A pre-feasibility study, permission for wind

measurements

B Site approval, land use rights

C Site registration,

wind measurements

E Land clearance, site preparation

F Investment report

G Power purchase

agreement (SPPA) H Contract on grid

connection I Construction license, ownership certificate

J Electricity operation

license Electricity production

Site included in power plan

Site not included in power plan

D Feasibility study,

Investment license

Approval from Prime Minister necessary for projects

> 30 MW or

> 1,500 bn. VND (pre-)agreement on

grid connection

(pre-)agreement on power purchase

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Investor named obstacles in Viet Nam’s wind power development*

Current status and future prospects Obstacles from Investor Perspective

Secrurities and reliability in

measuring the wind, 24%

Mechanisms to support wind power

prices, 20% Slow licensing

procedures, 18%

Overlapping land-use planning, 18%

Limitation of Consulting

capacities, 9%

Difficulties in funding, 7%

Lack of information on wind power planning, 4%

*17 feasibility studies, 10 questionnaires and various interviews

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Current status and future prospects Opportunities & Threads for investors

Opportunities

Wind resources and political targets

Ambitious policy targets (PDP VII: 1GW/2020; 6,2 GW 20130)

Sustained significant growth in electricity demand

Private sector required to finance necessary capacity

No developed domestic wind industry

New investment law as of 1 July 2015

Fully competitive electricity market planned until (2025)

Increasing awareness for externalities of conventional power

Challenges

Complex political and regulatory environment

Off-taker risk

Low electricity price, low feed-in tariff

Local capacities in new sector

Complex (unestablished) procedures for investments

Limited capacity of the grid and other infrastructure problems

Access and quality of information and data (e.g. wind measurements)

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Vietnam energy sector has and will continue to see rapid development

High technical (and economic!) potential for wind energy

Policy/regulatory framework under revision (FIT to be adjusted)

Conditions for FDI to improve (new investment law)

GIZ (and others) supporting the sector and all stakeholders interested

Wrap-up: Vietnam a dynamic,

challenging, yet promising market!

Facilitator

Long Nguyen | Development of Wind energy in Vietnam | 15.10.2015 | Page 25

Thank you for your attention

Documents

Regulatory Frameworks, Market Cultivation and Outlook …€¦ · Regulatory Frameworks, Market Cultivation and Outlook for Wind Energy in Vietnam Long Thang Nguyen, Consultant Up-Scaling